KINGMAN - Arizona has reached, or is about to reach, the bottom of its recession, but the worst of its budget wrangling may be yet to come. That was the assessment given by state Treasurer Dean Martin before a gathering of the Kingman Republican Men's Club at the Elks Lodge Monday afternoon.
"My forecast for the economy is the same one I've had for about the last year," Martin said. "Basically, if you want to understand the economy, think of the Nike logo - you know that swoosh?"
Martin likened the famous shoe logo to that of Arizona's path from recession into recovery, with the logo's dip representing where the state currently is, having followed the last three years of economic downturn after the burst of the housing bubble in mid-2006. The good news, Martin said, is that the last part of the logo - its long, rising tail - is yet to come.
"My forecast is actually for 2010 to be a very mild, very small recovery," Martin said. "If we have 1, 2 percent growth in 2010, that's great."
Martin noted that increased consumer spending will be one of the key elements to Arizona's economic recovery. While consumer confidence was already badly shaken by the collapse of the housing bubble, Martin claimed the shock was made much worse by both presidents George W. Bush and Barack Obama "playing the fear card" with first the Wall Street bailout in late 2008, then the economic stimulus package in early 2009.
"Remember (Bush) went on national TV and said 'You don't pass my bills, it's going to be the next Great Depression?' Consumer confidence just took a nosedive," Martin said. "(Then Obama) went on national TV said 'If you don't pass the stimulus bill, it's going to be the next Great Depression.' ... That's what got us here, and it's also one of the reasons I think 2010 is going to be better, because things were so bad at the end of '08 into the beginning of '09, it becomes easier to marginally improve."
But as consumers timidly start to tap into their newly created savings accounts and start spending again, Martin issued a stern warning against Gov. Jan Brewer's proposal to raise the statewide sales tax in order to avoid additional spending cuts, pointing to a six-month drop off in sales following the state's last sales tax increase.
"If you're at the weakest point (in your economy), and you cause a drop off in sales, you're actually going to prolong your recession," Martin said. "You're actually lengthening this recession for Arizona by at least another six months."
Martin said his solution to the current budget deficit was simple enough - don't spend more than you take in. The trick to achieving this, he said, would be to drop state spending to pre-2007 levels, into "the mid-to-low $8 (billion range)," primarily through cuts to entitlement programs such as Arizona Health Care Cost Containment System and the Department of Economic Security.
"There were a lot of promises made under the previous governor (Janet Napolitano, who now heads the Department of Homeland Security) with money the state never had," Martin said. "Why are we continuing those programs or those expansions if the economy has reset itself?"
Martin endorsed the idea of giving voters the chance to decide the state's fiscal fate, by allowing them to vote to either raise taxes in order to maintain the current level of funding or to cut spending to 2005-2006 levels, which he believed would be the voters' overwhelming choice. Whatever the Legislature ends up doing, however, Martin urged that they do it sooner, rather than later.
"If you ignore this problem, you're never going to be able to truly balance the budget structure," he said. "The problem is, the longer you go without balancing the budget, the harder and harder that becomes."